(Bloomberg) — Asian shares rose on Thursday after U.S. stocks hit fresh highs after economic data supported a Federal Reserve interest rate cut.
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Regional stock indexes in Asia rose for the fifth straight session, led by Japan’s Topix hitting a new intraday record and gains in South Korea and Australia. The S&P rose 0.5% and the Nasdaq rose 0.9%, both hitting record highs, despite a shortened trading day on Wednesday ahead of a U.S. holiday. U.S. stock contracts were steady in early Asian trading.
The move was also bolstered by data showing the services sector contracted at its fastest pace in four years and the labor market showed signs of further weakening.
In Asia, the yen rose on Thursday after hitting its lowest against the dollar since 1986 in the previous trading session, on continued expectations that the Bank of Japan will only gradually tighten monetary policy.
Minutes from the Fed’s June policy meeting showed officials are divided on how long to keep rates high as they await evidence that inflation is subsiding.Swaps traders are expecting roughly two rate cuts in 2024, with the first coming in November, but bets are also growing for a September cut.
“Bad news is good news,” said Fawad Razakzada of City Index and Forex.com. “That’s how risk assets reacted following the U.S. data release today.”
Australian and New Zealand government bond yields fell early Thursday as the 10-year U.S. Treasury yield fell seven basis points to 4.36%, weighing on a stronger dollar index.
Elsewhere in Asia, Chinese electric-vehicle brands maintained their share of Europe’s struggling EV market in May, with automakers such as BYD accounting for 8.7% of total EV sales, roughly the same level as a year ago, as Chinese companies pressured European rivals with cheaper new models.
Meanwhile, as Britons prepared to head to the polls for Thursday’s general election, the pound was little changed in early Asian trading hours.
Employment Report
Investors will be focused on the U.S. jobs report on Friday, where economists expect nonfarm payrolls to rise by 190,000 in June, down from the previous month, and the unemployment rate to remain at 4%.
“Given other evidence that economic conditions are cooling, the jobs data could become increasingly crucial as the Fed looks for a reason to cut rates,” said Quincy Krosby of LPL Financial.
Chicago Federal Reserve President Austin Goolsbee said the U.S. central bank still needs to see more data before it feels confident about cutting interest rates.
“Until employment weakens significantly, fundamental support remains for the U.S. economy, but there are some signs of slowing,” said Don Rissmiller at Strategas. “Fed members have signaled they would like to see further improvement in inflation. Fortunately, the U.S. economy still looks strong enough at this point to support an extended pause on rate hikes, but the clock is ticking.”
In commodities, gold was steady after gains on Wednesday, while crude oil was near a two-month high after a government report showed U.S. crude inventories fell by the most in nearly a year.
Major events this week:
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UK general election on Thursday
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US Independence Day holiday, Thursday
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Eurozone retail sales on Friday
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US jobs report, Friday
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Fed President John Williams to speak Friday
Some of the key market developments:
stock
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S&P 500 futures were little changed as of 9:46 a.m. Tokyo time.
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Hang Seng futures rose 0.9%
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Nikkei 225 futures (OSE) up 0.5%
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Japan’s TOPIX rises 0.6%
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Australia’s S&P/ASX 200 rose 1.1%
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Euro Stoxx 50 futures little changed
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was little changed at 1.0791 dollars
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The Japanese yen remained almost unchanged at 161.55 yen to the dollar.
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The offshore yuan was little changed at 7.3017 per dollar.
Cryptocurrency
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Bitcoin rose 1.4% to $60,350.19.
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Ether rose 1.6% to $3,307.15.
Bonds
merchandise
This story was produced with assistance from Bloomberg Automation.
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